The Canada Revenue Agency (CRA) likes to keep track of everything, from where you live, to how much you make, to who you’re sharing a bedroom with. The good news is, if you’re in a common-law relationship, there are a number of tax benefits you can take advantage of. An online income tax calculator can help ensure you are filing your taxes accurately and maximizing your returns.
What Is a Common-Law Partner and How Is It Different from a Spouse?
When it comes to relationships, the CRA doesn’t care about labels (e.g., dating, engaged, in a long-term relationship). They only care about how long the two of you have been living at the same address.
What’s the difference between having a spouse and being in a common-law relationship? A spouse is someone you are legally married to, while a common-law partner is someone you have had a conjugal relationship with for at least 12 consecutive months. The 12 consecutive months can include any period you were separated for less than 90 days because of a breakdown in the relationship.
If you’ve lived together for less than 12 months but share a child or one of you supports the other one’s child, the CRA considers you to be in a common-law relationship.
That could mean there are probably a number of Canadian couples who are, without even knowing it, in a common-law relationship. But the CRA does. And this will have an impact on how you file your taxes. In fact, for the purposes of the Canadian Income Tax Act, common-law partners are viewed the same as married couples.
That’s why it’s important to know if you are living in a common-law relationship or not.
How to File Taxes as a Common-Law Partner
If you meet the legal definition of a common-law partner, you need to indicate that fact on your tax return. Regardless of your relationship status, you both need to file your own annual income tax return.
But you and your common-law partner need to include information about each other in your tax return. On the “Information about you” page, you need to indicate what your marital status is as of December 31.
Along with your own personal information, you will have to include your common-law partner’s name, social insurance number, and net income (even if they don’t have any).
Advantages of Filing Taxes as a Common-Law Partner
The CRA looks at the total earnings of a common-law partnership to determine if you’re eligible for certain government benefits or tax credits, and who should claim them. As with most aspects of Canada’s confusing tax law, there are both advantages and disadvantages of filing your annual income tax return as a common-law partner.
As a common-law partner, you may be able to:
- Contribute to a spousal RRSP.
- Combine receipts, including charitable donation and medical expenses.
- Claim both your provincial and federal spouse or common-law partner amount tax credit if you supported your partner financially.
- Claim the $5,000 Home Buyers tax credit amount or split it with your partner.
You might also be able to transfer credits you don’t use to your partner, thereby lowering the amount of tax they pay. This includes:
- Age credit (if they’re over 65 years of age)
- Pension income payment amounts
- Disability Tax Credit
- Credits for post secondary education, such as textbook and tuition credits.
Disadvantages of Filing Taxes as a Common-Law Partner
Being in a common-law partnership allows you to maximize certain tax credits and deductions. On the other hand, it also means you could lose some tax credits you would otherwise enjoy while you were single. This is because the CRA combines the family income, which will impact income-relation benefits.
- GST/HST credit
- Canada Child Benefit
- Eligible dependant credit
- Guaranteed Income Supplement and the Allowance
While some Canadians earning less than a certain threshold love getting their GST/HST rebates, chances are they won’t be able to claim that when they’re in a common-law relationship. Again, that’s because the CRA combines your incomes to see if you meet the definition of a low-income family.
It might be tempting to say you aren’t living in a common-law relationship to keep that GST/HST rebate or some other credit, but you’d be on the wrong side of the law if you did. It’s illegal to lie on your tax return. That includes pretending you aren’t in a common-law relationship.
What Happens if You and Your Common-Law Partner Separate?
For example, if you break up and file your taxes a week later, you’re still considered to be in a common-law relationship. In the eyes of the CRA, you are only formally separated if you and your common-law partner have been separated for a minimum of 90 days.
You also need to notify the CRA at the end of your 90-day separation and pay back any benefits you received during that three-month period.
File Your Taxes Online with FastnEasyTax.com
If you’re in a common-law relationship and want to find out how your relationship can impact your tax returns, the personal income tax experts at FastnEasyTax.com can help.
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Our tax programs are easy to understand, the platforms are easy to use, and our customers get their tax refund back within 10 days. If you’re having difficulties, reach out to us and we’d be happy to help you in any way possible.
To learn more about how FastnEasyTax.com can help simplify your personal income tax process, contact us today.